Captain’s log, stardate 20190509

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# Hourly Rate Calculators - part 2

Sent by Jonathan Stark on May 9th, 2019

Hourly rate calculators typically start by asking you something like:

“What is your desired annual salary?”

As a starting point, this is nonsense but okay… let’s think about it for a sec because I think it reveals an interesting psychology.

Ask yourself:

“Why not enter $1,000,000 as my desired annual salary? Why not $10,000,000?”

These are not outrageous annual revenue numbers for a small business, but I’d be pretty surprised if many people entered a million+ dollar desired salary into one of these calculators. I think I know why they don’t... because entering 7- and 8-figure numbers into a rate calculator immediately reveals the insanity of hourly billing.

Consider this: to make $1 million dollars per year working 40 billable hours per week, 52 weeks per year, your hourly rate would work out to $480.77/hour.

- Would clients hang up as soon as you told them you charge almost $500 bucks per hour? How would you justify it?
- Could you really be billable 40 hours per week 52 weeks per year? What about administrative duties? What about vacation? What about sick days?
- Would $1M per year in gross revenue (maybe $650K after tax and expenses) be enough? Will it still be enough in 10 years?

Billing for your time is a really hard way to generate $1M or more in annual revenue. Heck, it’s a really hard way to generate a quarter of that. Bottom line? **Billing hourly places an artificial ceiling on your income.**

The solution? Instead of playing with imaginary numbers in an hourly rate calculator, talk to your ideal buyers about what they would value most. Then package that up in a way that leverages your expertise in a low-touch, repeatable fashion.

Yours,

—J